Trademark License

EXHIBIT 10.125


EXECUTION COPY


TRADEMARK LICENSE


This Trademark License and Operating Agreement is made and entered into this ___ day of January, 2001 by and between, Aris Industries, Inc., a New York corporation ("Aris"), XOXO Clothing Company, Incorporated, a Delaware corporation ("XOXO"), BP Clothing Company, Inc., a Delaware corporation, ("BP"), Europe Craft Imports, Inc., a New Jersey corporation ("ECI") and Marcade Realty Corp., a New York corporation ("Marcade"), on the one hand, and Grupo Extra of New York, Inc., a New York corporation, with an address at c/o Mark Stern, 141 West 36th Street, New York, NY ("Licensee"), on the other.


RECITALS


A. XOXO, BP, ECI and Marcade are direct or indirect wholly owned subsidiaries of Aris.


B. XOXO is the owner of the trademarks XOXO(R)and Fragile(R).


C. ECI is the owner of the trademark Members Only(R).


D. BP is the licensee of the name Baby Phat(R) under a license agreement dated as of July 1, 1999 for the manufacture and sale of women's sportswear (the "BP License Agreement").


E. ECI is the licensee of the name Brooks Brothers Golf(R) under a license agreement made as of November 10, 1999 (the "BB License Agreement").


F. Each of XOXO, BP and ECI are referred to herein as a Licensor to the extent it has rights in the Trademarks as listed in Recitals B through E, above.


G. Marcade is the tenant under leases for twelve XOXO Outlet Stores identified on Schedule B (the "Outlet Stores").


H. Licensee is in the business of manufacturing, selling and distributing, among other products, sportswear, outerwear, golf wear and denim bottoms.


I. Licensee desires to obtain from Licensor an exclusive license to manufacture, market, sell, distribute and advertise the Licensed Products using the Trademarks in the Licensed Territory, all as set forth on Schedule "A," and to purchase all of Licensors' inventory of Licensed Products, assume certain of its leases and other agreements, and absorb certain of their overhead structure.


J. The parties desire that this Agreement be effective as of February 1, 2001 (the "Effective Date").


K. Licensee represents that it has the ability to manufacture, market, sell, distribute and advertise the Licensed Products in the territory set forth on Schedule "A" hereto (the "Licensed Territory") and to use the Trademarks on or in association with the Licensed Products.


NOW, THEREFORE, in consideration of their respective promises and agreements made herein, the parties agree as follows:


1. LICENSE


1.1 Grant of License. Subject to the terms and conditions of this Agreement, as of the Effective Date, each Licensor hereby grants to Licensee (either by itself or through other entities under common control with Licensee) the exclusive right and license (the "License") to use the Trademarks in which it has the rights described in Recitals B through E solely to manufacture, market, advertise, promote, sell and distribute the Licensed Products in the Territory during the Term of this Agreement. The License created hereby only allows the Licensee to market, sell, distribute and advertise the Licensed Products for sale at wholesale solely to retailers located in the Licensed Territory and does not permit Licensee to engage in the retail sale and/or retail marketing of the Licensed Products except for the Outlet Stores and such other outlet stores as Aris may approve in writing, which approval will not be unreasonably withheld, delayed or conditioned.


1.2 Determination of Licensed Products; Right of First Offer.


1.2.1 Determination of Licensed Products. Licensee agrees that it will not manufacture, market, sell, distribute or advertise, either directly or indirectly, any style, design or product not in effect on the date hereof which Licensor, in its reasonable discretion, has not expressly approved.


1.2.2 Right of First Offer. In the event a Licensor decides to grant a license for any of the Trademarks in connection with the manufacture and sale in the Licensed Territory of products not included in the Licensed Products or for any products in Mexico or South America (other than pursuant to existing license agreements), it shall first offer (the "Offer") such license to Licensee, stating the term, royalty rate, minimum guaranteed sales and royalties and channels of distribution for which it proposes to grant such license. For the next 30 days, if Licensee desires to accept such license, Licensor shall negotiate exclusively with Licensee for such license. If, after such 30 day period, the parties have not reached agreement with respect to such license, Licensor may enter into a license for such product, in the 180 period following expiration of the 30 day period, on terms and conditions not materially more favorable to the licensee than are contained in the Offer.


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1.3 Approval Regarding Other Products Etc. Licensee acknowledges that Licensor may grant additional licenses in the future for territories, products and categories not presently licensed and not within the scope of this License. Permission of Licensor for Licensee to manufacture a particular style, design or product, or to distribute the Licensed Products within an area, which is not, in the reasonable opinion of the Licensor, within the scope of the License, shall not constitute a continuing approval or a waiver of the right of Licensor to later disapprove any style, design, product, or distribution area.


1.4 Use/Ownership of Trademarks. Other than as expressly set forth in this License, Licensee has absolutely no right, title or interest in or to the Trademarks or the use thereof. Licensee acknowledges that it is only acquiring the right to use the Trademarks in connection with the manufacture, marketing, advertising, promotion, distribution and sale of the Licensed Products in the Licensed Territory, for the Term set forth in this Agreement and subject to the terms hereof. Upon termination of the License, Licensee shall cease all use of the Trademarks except as provided in Paragraph 18. Licensee shall not apply anywhere in the world, to register any copyright, trademark or trade name that in any way mentions or uses the Trademarks or any trademark or trade name that is confusingly similar to the Trademarks or trade names licensed hereunder, without the express prior written consent of Aris.


1.5 Ownership of Trademarks. Each Licensor hereby represents and warrants that it is the sole owner of the Owned Trademarks, free and clear of all claims, liens and encumbrances other than an existing lien in favor of CIT Commercial Group Services, Inc. ("CIT") to secure a term loan with a current outstanding principal balance of $7.5 million. Licensee agrees that the Trademarks and all rights, registrations and entitlement thereto, together with all applications, registrations and filings are and shall remain the sole and exclusive property of Licensor.


1.6 Use of Names. Except as authorized pursuant to this License, and only to that extent, Licensee shall not use the Trademarks or any confusingly similar or substantially similar word or names in its business name or otherwise in any other manner, without the prior written consent of Aris.


1.7 Best Efforts. Licensee shall use its best efforts to manufacture, market, sell, distribute and advertise the Licensed Products in order to meet the demand for the Licensed Products in the Licensed Territory and to uphold, protect and defend the image and reputation of the Licensed Products and the integrity of the Trademarks. Licensee further agrees to use its best efforts to manufacture and ship not less than 75% of all approved, confirmed orders for Licensed Products within a reasonable time of receipt of approved orders, as hereinafter defined, or by the delivery date specified in such orders. Licensee shall maintain a sales organization that will sell the Licensed Products and that will be capable of effectively soliciting orders for sales of the Licensed Products in the Territory.


1.8 Assignment. As of the Effective Date, ECI and BP will transfer and assign unto Licensee all of their respective right, title and interest in the BB License Agreement and BP


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License Agreement, respectively, subject to any and all terms and conditions set forth therein, and Licensee hereby assumes and agrees to fully and faithfully perform all of the obligations, duties, and responsibilities of ECI and BP under such License Agreements from and after the Effective Date. Licensee agrees to hold ECI and BP harmless from and against all claims, losses, liabilities and expenses, including reasonable attorney's fees, incurred as a result of or in connection with any failure of Licensee to adhere to the aforementioned covenant. ECI and BP each hereby agrees to hold Licensee harmless from and against all claims, losses, liabilities and expenses arising under such License Agreements as a result of their activities prior to the Effective Date. BP and ECI shall pay actual royalties to the respective licensor under the BP and BB License Agreements for sales made between January 1, 2001 and the Effective Date. In connection with such assignments, Licensee shall, upon execution hereof, pay to Aris for payment to the licensors under the BP and BB License Agreements, the Minimum Guaranteed Royalty due for the first quarter of 2001 in the amount of $495,000 and $127,500, respectively. Each party shall cooperate with the other to obtain the consents of the licensors under the BP and BB License Agreements.


2. LICENSED TERRITORY.


2.1 The Licensed products shall only be sold, marketed, distributed or delivered exclusively by Licensee, either directly or indirectly, in the Licensed Territory.


2.2 Licensee shall not, directly or indirectly, sell, market, distribute or deliver, the Licensed Products outside of the Licensed Territory without prior written consent of Licensor, which consent may be withheld in the sole and absolute discretion of the Licensor. Licensee shall not, directly or indirectly, sell, distribute or otherwise deliver or cause to be sold, distributed or delivered, the Licensed Products to any individual or entity whom Licensee knows, or reasonably believes might, sell the Licensed Products outside the Licensed Territory.


2.3 Nothing contained herein shall in any way restrict or prohibit Licensor from licensing, marketing, manufacturing, selling or distributing the Licensed Products outside the Licensed Territory and Licensee shall have no rights therein.


3. TERM.


3.1 Term. The initial term of this License shall begin on the Effective Date and terminate on December 31, 2005 ("Term" or "Initial Term"). The First Annual Period shall begin on the Effective Date and end on December 31, 2001. Each Annual Period thereafter shall commence on January 1 and end on December 31 for each year respectively.


3.2 Renewal. Licensee has the right to extend the term of this License for four additional five year Terms of five years (each, a "Renewal Term"). Said right must be exercised by providing written notice to Licensor at least six (6) months and no more than nine (9) months, prior to the end of the Initial Term and any Renewal Term. Said right may only be exercised if Licensee is in substantial compliance with its obligations under this Agreement as of the time of exercise of the option and as of the date of commencement of the Option. In the event of any extension or renewal of this Agreement as provided herein, all terms and conditions of this


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Agreement shall remain in full force and effect, except as otherwise set forth in this Agreement. Should Licensor, in accordance with the terms of this Agreement, exercise its right under this Agreement to terminate the rights of Licensee hereunder, thereafter Licensee shall not have any option to extend the term of this Agreement.


4. ROYALTY PAYMENTS. In consideration for the license granted pursuant to this Agreement, the Licensee shall pay to Licensor, a royalty based on Net Sales of the Licensed Products ("Royalty") as follows:


Licensed Product: Royalty Rate:
---------------- ------------


XOXO(R) 9%
Members Only(R) 8%
Fragile(R) 9%
Baby Phat(R) 7%
Brooks Brothers Golf(R) 7%


The Royalty for Brooks Brothers Golf(R) and Baby Phat(R) Products shall be in addition to the amounts payable by Licensee under the BP and BB License Agreements. Sales to off-price channels of distribution of Licensed Products with respect to the Owned Trademarks may not exceed twenty-five (25%) percent of the total sales of Licensed Product during each Contract Year. Licensee may only sell Licensed Products under the Owned Trademarks at twenty (20%) percent or more off its normal wholesale selling price thirty days or more after such Licensed Products have been marked down at retail unless Licensor has approved such earlier markdown in writing. The Royalty for closeouts, seconds or irregulars up to 25% of Annual Net Sales shall be one-half of the applicable Royalty Rate. The Royalty on any such sales in excess of that amount shall be at the Royalty Rates set forth in the table above. Licensee may only sell irregulars as they develop as long as they are clearly marked "irregular."


4.1 Advance Payment of Royalty. On execution hereof the Licensee shall pay to Licensor an advance in the amount of $3,160,000 which payment shall be credited against the Guaranteed Minimum Royalty Payment due for the first quarter and a portion of the second quarter of the First Year of the Term, pursuant to Paragraph 4.4 below.


4.2 Net Sales. As used herein, "Net Sales" shall mean Licensee's gross sales (as determined by the gross invoice amount billed to customers) of the Licensed Products, whether or not actually paid for, less actual returns, freight and bona fide trade discounts actually granted by Licensee. No costs incurred in the manufacturing, selling, advertising and/or distribution of the Licensed Products or in the payment by Licensee of any taxes of any nature whatsoever shall be deducted from the gross sales amounts or from any royalty payable to Licensor, except in the event of a withholding tax on royalties due to Licensor, nor shall any deduction be allowed for any uncollectible accounts or allowances. Licensee shall provide Licensor reasonable documentation evidencing any allowances, deductions, returns, credits, etc. Net Sales shall not include sales to or by the Outlet Stores.


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4.3 Minimum Sales. Licensee shall achieve the Minimum Net Sales in each Year of the Term as follows:


Year ended December 31 Minimum Sales
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2001 $ 90,000,000
2002 $ 102,600,000
2003 $ 116,964,000
2004 $ 133,338,960
2005 $ 150,000,000


4.4 Guaranteed Minimum Royalty Payment. Licensee shall pay to Licensor a Guaranteed Minimum Royalty Payment for each year during the term hereof, in accordance with the terms of Schedule "A" attached hereto (the "Guaranteed Minimum Royalty"). For each year, the Guaranteed Minimum Royalty shall be payable in equal quarterly installments on the first day of each quarter of the year. On April 1, 2001, Licensee shall pay Licensor that sum of $890,000, representing the balance of the Minimum Guaranteed Royalty for the first two quarters of 2001.


4.5 Manner of Payment; Quarterly Statements. The Royalties due Licensor shall be calculated and paid within 30 calendar days of the end of each calendar quarter during the term hereof, for Net Sales invoiced and delivered during the immediately preceding calendar quarter, (the "Royalty Period). Concurrently with the payment of each Royalty Payment, Licensee shall deliver to Licensor a written statement showing any pre-payment of royalties made by Licensee to Licensor and all of the Licensed Products sold and delivered during the applicable period covered by the Royalty Payment together with such documentation including, without limitation, bills of lading and letters of credit, requested by Licensor to demonstrate the GPP on the Net Sales covered by the Royalty Payment. Said statement shall be in the form and shall contain the information as Licensor may from time to time direct. If the Licensor shall change the form of and information required on the statement, then Licensor must give the Licensee at least ninety (90) days notice of such change. Such royalty statement shall be certified as accurate by a duly authorized officer of Licensee, reciting on a customer by customer basis, the stock number, item, units sold, description, quantity shipped, gross invoice, amount billed customers less discounts, allowances, returns and reportable sales for each Licensed Product. Such statements shall be furnished to Licensor whether or not any Licensed Products were sold during the Royalty Period. If payment is not timely made, an interest charge of prime plus 3% shall be added to the unpaid balance following a cure period of ten (10) days until said balance, plus accrued interest is paid in full.


4.5.1 Licensee's obligation to pay Licensor the Royalty Payment shall accrue upon the sale of the Licensed Products regardless of the time of collection by Licensee. For purposes of this Agreement, a Licensed Product shall be considered "sold" upon the date when such Licensed Product is billed, invoiced, shipped or paid for, whichever event occurs first.


4.5.2 If Licensee sells any Licensed Products to any party affiliated with Licensee, or in any way directly or indirectly related to or under the common control with Licensee, at a price less that the regular price charged to other parties, the Royalty Payment


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payable to Licensor shall be computed on the basis of the regular price charged to the other parties.


4.5.3 Upon five days prior written notice to Aris, Licensee may pay to CIT on behalf of Aris any regularly scheduled principal installment then due under the Term Loan. Such loan is payable in quarterly installments of $500,000 on the first day of each calendar quarter. Any such payment shall be credited against Royalties due as of such payment date.


4.6 Liquidated Damages. In the event that this License Agreement is terminated as a result of Licensee's default, in addition to any amounts due for Royalties (including Guaranteed Minimum Royalties), as liquidated damages, Licensee shall pay Aris, within 30 days of termination, an amount equal to the Guaranteed Minimum Royalty in effect for the year in which the Agreement is terminated.


4.7 Books, Records and Reports. Licensee shall keep true and accurate books of accounts and records in accordance with generally accepted accounting principles (GAAP) with respect to all transactions involving the Licensed Products. Should the generally accepted accounting principles applied in the Territory differ from US GAAP, Licensee will provide, to the satisfaction of Licensor, conversion to US GAAP requirements.


4.8 Annual Reports of Sales. For each Annual Period during the term hereof, Licensee shall submit to Licensor an annual statement for the period ending December 31. The year-end statement shall be submitted by March 15th of each year for the previous calendar year. Each statement shall include a detailed and cumulative account of all transactions of the Licensed Products, including, without limitation, all sales, all returns, all bona fide trade discounts, the direct cost of goods sold for Products included in Net Sales for such Year, all royalties paid and payable, all Licensed Products returned as substandard, and all orders canceled for non-delivery and such other information as Licensor may from time to time reasonably request. The Chief Executive Officer and the Chief Financial Officer of Licensee shall jointly and severally certify this report to be correct.


4.9 Purchase of Inventory; Transfer of Orders. Within four months of the Effective Date, Licensee shall purchase, and Licensor shall sell, F.O.B. Licensor's warehouses, all inventory (the "Inventory") of the Licensed Product on hand as of the Effective Date, at Licensor's cost, substantially as set forth on Schedule C, less a reserve for obsolete inventory determined in accordance with GAAP. The Inventory as of the Effective Date shall consist of the Inventory as of December 31, 2000 plus such items purchased, and minus such items sold in the ordinary course of business since that date. Licensor's inventory of Licensed Products as of December 31, 2000 is set forth on Schedule C. Licensor shall update such Schedule as of the close of business on the day immediately preceding the Effective Date. Licensee shall pay for the Inventory purchased hereunder within two business days of its shipment from Licensor's warehouse. Licensee shall use its best efforts to use the Inventory to fill existing orders and any new orders for Licensed Products. Any Inventory not purchased within four months of the Effective Date to fill orders shall be purchased by, and paid for, by Licensee within 5 days after


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the expiration of such four month period. The Inventory will be delivered free and clear of any claims, liens and encumbrances.


5. ADVERTISING. Licensee shall not implement any advertising program or place any advertisement using the Trademark or for the License Product not pre-approved, in writing, by Licensor, which approval shall not be unreasonably withheld or delayed.


6. AUDIT. Licensee shall keep complete and accurate books and records at its principal place of business covering all transactions relating to this Agreement. Licensor and/or its duly authorized representatives shall have the right, at reasonable business hours and upon seven (7) business days notice, at the place where such records are normally maintained, to inspect, audit, examine and make copies of such books and records and all other documents and material in Licensee's possession or control regarding any transactions relating to this Agreement. Licensor may not audit Licensee more than once in any Contract Year unless prior audits have uncovered Royalty underpayments of five percent (5%) or more.


6.1 All books and records of Licensee relating to this Agreement shall be retained by Licensee, and made available for Licensor review, for at least three (3) years following termination of this Agreement.


6.2 The receipt or acceptance by Licensor of any of the statements furnished or any payments made by Licensee pursuant to this Agreement shall not preclude Licensor from reviewing the books and records or from questioning the accuracy thereof. Licensor shall have the right no more than one time per annual period to audit Licensee's books to determine the correctness of payments/amounts due Licensor hereunder. The cost of said audit shall be borne by Licensor. However, if any audit reveals an underpayment by Licensee of five percent (5%) or more, Licensee shall pay forthwith (and in no event later than five (5) days after completion of said audit), the cost of the audit, and all payments found to be due, with interest thereon, at the rate of prime plus 3%, computed from the date said unpaid payments/amounts would have been due had they been properly accounted for until the date they are actually paid.


6.3 In the event that an audit or investigation of Licensee's books and records is made, certain confidential and proprietary information of Licensee may necessarily be made available to the person(s) conducting such audit or investigation. It is agreed that such confidential and proprietary information shall be retained in confidence ...